Winners and losers in the credit crunch

THE POSSIBILITY OF a recession in the US is becoming less a question of "if" than of "for how long?". The safeguard against a US recession, the awesome power of the US consumer, has been diminished. Consumers account for more than two-thirds of US economic activity, and after the worst Christmas for retail sales in five years there is now a genuine fear that a heavy recession is about to, or indeed already has, enveloped the world’s biggest economy. And despite assurances from many emerging markets investors that Asia has successfully decoupled from the developed markets, the recent decline in Asia’s stock markets belies this assertion. There is evidence that global economies are following the US into a downturn and, depending on its severity in the US, a recession could cause serious pain for companies around the world. "A heavy recession will spill over into other markets," says Joseph Biernat, head of research at European Capital Management. "Anything else, and we don’t expect a backlash, except maybe in the UK, where excess leverage is a particular problem."